Saturday, January 16, 2010

Over at CAIVN, there's a fantastic article on the problem with food stamps, which makes this point among others:

"The report indicates that, 'The USDA has shown that every dollar in federal food stamp expenditures generates $1.84 in economic activity. In addition to helping people put food on the table, food stamps exert a multiplier effect that stimulates the economy.' This begs the question: economic activity for whom? The Wal-marts and JP Morgan/Chase Banks of California will see an upshot in all of this, but farmers markets and food stores supplied by small farmers won't see much of the action."

Go figure that a government program might actually be corporately motivated and help benefit entrenched corporate interests more than it does its intended beneficiaries. Additionally, I felt obliged to leave a comment making the following economic point about food stamps:

The argument that food stamps stimulate economic activity is based on what Frederic Bastiat called "The broken window fallacy." If a child breaks a window, then you could argue the house owner's expenditure to fix it stimulates economic activity because he pays the "window guy" to repair it, who uses that money to pay his rent, and the landlord takes that money to buy food, and so on and so forth.

But what we don't and can't see is what the house owner's money would have gone to do if he didn't need to fix the broken window. It would have likely had another, more productive use. So if the CFPA would like, we can go around breaking windows to stimulate economic growth, but I think they'd see the problem with that. Food stamps do the same exact thing because that's money taken from the economy that could have been put to more productive use (not to mention the economic inefficiency of paying a bureaucracy to distribute that money instead of letting the people spend it whose hands it's already in).

The CFPA can point to how it "stimulates growth" but they can't and don't see the opportunity cost- what that money could have gone to do. To use one more analogy: does dipping a bucket in the deep end of a swimming pool and walking over to the shallow end and dumping it there raise the level of the pool? No. That's all food stamps do. And there's "spillage" in the process that actually lowers the level of the pool.

Posted by
W. E. Messamore

13 comments:

Todd
said...

A policy to eliminate food stamps seems like a sure way to not get elected.

Poor people vote. I don't think they want to eat ramon noodles and potatos so the economy can grow at a fast rate. Why would they when they get a very small portion of the benefits.

People who don't like the social unrest that comes with the free market vote too.

People who don't think people who live in poverty should be the ones we ask to suffer so we can grow our economy vote.

Pinochet eliminated much of the welfare state and within, what 5 years he was forced to re-instate them. Since at the time he was murdering socialists, I will assume he did it so he can stay in power.

Are they buying the poor's vote? absolutely!!

Do the poor get a 'free ride'? Absolutely!!When hasn't a class on people gotten a free ride on the government? I am pretty sure the Pharoh didn't lift one brick to build the pyramids.

if you give everyone the right to vote, expect some form of socialist government.

Friedman insisted that you had to have economic freedom to get political freedom.

He was wrong with this statement in many ways, but I would argue one on them is that you have to give up some economic freedom in order to insure your political freedom.

The thing to remember here is that I am not your typical heartless (and proud of it) libertarian who thinks the poor can all go to hell for all I care.

When of my primary concerns is the welfare of the poor and the end of poverty in the world. Programs like food stamps destroy productive capital that could have gone to actually employing a poor person in a productive job that will create value which will help employ other poor people.

And note the excerpt from the article and my commentary- government programs are usually motivated by and designed for the interests of the wealthy at the expense of the poor. It takes a little bit of refinement to understand this, but I am confident that the message can and will spread, and the poor will see that the welfare state has not helped them.

The real tragedy is that we were ready to win the war on poverty in the United States before Johnson's damned Great Society program came in and did what nearly all government programs do- wreck the very thing it's supposed to fix.

"The poor are told to accept a smaller piece in proportion to everyone else, because 'we need to bake a bigger pie'

A New pie gets baked, well, and what do the poor hear... 'we need to bake a bigger pie'"

When did something like this happen? When aggregate economic productivity boomed, when did it ever not benefit the poor and raise their standards of living?

And food stamps could only properly be called a solution for a very impotent libertarianism. To use an extreme illustration, I will never argue for privatized concentration camps instead of government-run concentration camps and fancy myself a libertarian.

Food stamps do the same exact thing because that's money taken from the economy that could have been put to more productive use"

... right, like locking up the food rioters.

Sure, you'll think/write, "No. I meant real jobs." Right, so were are they? Are people supposed to turn off their stomachs for the 3, 6, 9, 12 + months it is taking to find one?

And, please, as scary as it is for you, the US controls its own currency and, as needed, prints its money.

Food stamps are not drawn from some limited pool (yes, I am making a passing reference to your bucket example), as $ that are backed by gold, or whatever you might imagine, would be.

US funds, and the variety of forms they take - including FS, are backed by the good name of ... wait for it ... the US.

Not only that, the US keeps its good name while its economic activity is strong. FS generally, but particularly in times of emergency (i.e., now), help keep economic activity vibrant.

Do Americans - gov & citizens, spend too much? Yes, at least I think we do. But here we are talking about food.

And, in the grand scheme of our rather sharp edged form of capitalism, helping people buy food when times are tough, while also noting the ancillary benefits to our actual economy (not mythical pools of water, etc.) such help yields, is worthy on just about every level of human dignity one can contemplate.

Where are the real jobs, you ask? They've been destroyed by an entitlement system, regulatory regime, warfare state, and corporate leeches, which have all sucked the economy dry of productive capital. They've also been destroyed by an artificial credit bubble, which stimulated an artificial demand for housing development and other projects that no one really needed or could afford, causing the misallocation of capital to industries that were not sustainable, and which collapsed after the bubble burst, causing unemployment.

If you want people to have enough to eat, enough to pay their bills, enough to live... if you style yourself as a humanitarian with a compassionate heart, then you should want most of all, to put Americans back to work. The only way to do that, is to turn off Washington D.C.'s spending and let all of that productive capital stay in the economy and change hands in mutually voluntary exchanges that create real value and produce more jobs.

First, let's be somewhat realistic. People will starve long before any of the changes you hope for will happen. In the ensuing time, FS are an option we have that actually works within the real economy we have today. In fact, within the economy we actually have, they help generate positive economic activity. This is part of what the original blog utterly missed and part of what I responded to.

Next, what are you talking about?

"The only way" to put people back to work "is to turn off Washington D.C.'s spending and let all of that productive capital stay in the economy and change hands in mutually voluntary exchanges that create real value and produce more jobs."

In case you missed one of the key points, FS stay in the economy and interact "productively" within it.

Our economy is not based on the amount of gold we have, or any other finite physical resource, like the imaginary pool of water the original blogger wrote about. It is based, really, on us, - the power of the US gov to print its own currency.

Okay, lots of bad people are sucking the life out of this country. I dislike them as much as you. In fact, I'm putting off useful stuff so I can write this I'm so PO'd.

But, the fact remains, you (and the original blog post) have misanalysed FS in our actual economy, in part it seems, b/c you both think of the US economy as a limited reservoir.

You don't like the US printing its own $ at will. Okay, but the markets are super confident in us right now (check the bond market, for instance), or they are super afraid of their alternatives.

Either way, we have a great deal of latitude to stimulate the kind of productive activity we all want to see. Stimulation via an entitlement program may not fit your philosophical view point, but this is reality.

I don't at all see the US economy as a static, zero-sum system. It is proponents of entitlements that do. My illustration points to the fact that coercive government planning doesn't grow the economy (it just moves around the wealth that's already there like the person with a bucket moving around water without actually increasing the total amount of water), implying that the real way we create jobs and opportunities is by actually growing the economy, which is something best left to small business, not big government.

The blog post doesn't "utterly miss" the claim that food stamps generate economic activity. It actually quite directly features and refutes that claim. What both of your comments utterly missed, however, was the main point of the blog post: that food stamps are used to generate profits for large agri-corporations and corporate grocery retailers at the expense of the rest of us. Can there be any denying it?

"government planning doesn't grow the economy it just moves around the wealth that's already there ..."

Okay, last time1. We're talking about government spending, not "planning"2. The "wealth" isn't "there" in any real sense. If it is, where is it? Fort Knox? The Fed? 3. FS, like the dollars in your wallet, are printed (backed in the case of FS) without being tethered to any real value like gold (i.e., a limited resource like your water example)

Finally, the post made its points in part as you have, by misconstruing our economy. Hence part of the reason for my focus, the other part being I'm allowed to focus in on what I find most interesting.

By the way, agra-business controls our food supply, so, frankly, your dollars and mine support them much more than FS do - at the grocery store, in tax breaks / expenditures, subsides, etc.

I hit this blog while doing research on the FS program. I've always heard Libertarians are thinkers. What I see so far is a lack of thinking and a rush to cling to doctrine - "government planning", "regulatory regime", "big gov" US "wealth" is like a pond, yada, yada.

These cliches only stop one from understanding the cease pool we're in.

Perhaps a better alternative to food stamps would be to focus on solving the issues that push people to using food stamps.

There could be a big push in financial responsibility, social responsibility, home gardening, or community gardens for those without yards, or the formation of non-profit organizations aimed at feeding those in need. I would much rather see people take care of people instead of the government.

The end result could be tighter knit communities, and less dependence on the government.